“Inflation is too high… “Growth needs to slow down.”
“There is a lot of uncertainty so be cautious”… freeze preview
Israel-Hamas war poses a risk to the economy
U.S. 10-year maturity Treasury bond interest rate is 4.996%… Close to 5%
Nasdaq 0.96% ↓New York stock market falls all at once
U.S. Federal Reserve Chairman Jerome Powell hinted at freezing interest rates in the future, but left open the possibility of further increases if the U.S. economic growth continues. He maintained his cautious attitude throughout, saying that the geopolitical crisis triggered by the war between Israel and Hamas poses uncertain risks.
On the 19th (local time), Chairman Powell attended an event hosted by the New York Economy Club and said, “Inflation is still high,” adding, “Short-term core prices have fallen below 3% in the past 3 to 6 months, but short-term prices are too volatile. “The good indicators of recent months are just the beginning for confidence that inflation is continuing to fall towards target,” he said.
He added, “The road to the goal is difficult and it will take time, but my colleagues and I will do our best to reduce inflation to the 2% level.” He also mentioned that the U.S. economy, which is growing based on strong consumption, needs to slow down, saying, “Continued growth could justify further austerity.” He also said the Fed’s policies are not tight enough.
However, Chairman Powell continued his cautious tone in remarks and talks that lasted for over an hour, saying, “We need to look at the data,” “It has become difficult to strike a balance between excessive and under-tightening,” and “Uncertainty has increased.” As geopolitical conflict intensifies, it has become difficult to predict the Fed’s path. “We are proceeding cautiously given the uncertainty and risk and how far we have come,” Powell said. “Extremely heightened geopolitical tensions pose significant risks to global economic activity and have very uncertain implications.”
When asked whether he was surprised by the strong resilience of the U.S. economy despite the Federal Reserve’s strong tightening policy, Chairman Powell said, “Economic activity has been active in areas less affected by interest rates, including those who received low-interest fixed mortgage loans.” “It appears that it is,” he replied.
Regarding the fact that the interest rate on 10-year U.S. Treasury bonds hit 4.996% today, approaching 5% for the first time since 2007, Chairman Powell said that it did not seem to reflect the rise in inflation or the Federal Reserve’s policy interest rate. He also pointed out that it may actually reflect thoughts about the U.S. fiscal deficit. In response to a question about whether rising Treasury yields could offset the need for further interest rate hikes, Chairman Powell responded, “That could be the case.”
After Chairman Powell’s talk, interest rate futures investors at the Chicago Mercantile Exchange’s Fed Watch were less concerned about rising interest rates than the previous day. Investors who predicted the possibility of further interest rate increases by the end of the year at 40% the previous day lowered it to 29% after the speech. Although it was only 1.9%, the possibility of an interest rate cut also appeared in the options for the first time. The Wall Street Journal (WSJ) analyzed, “This means that the central bank is unlikely to raise interest rates further unless there is clear evidence that U.S. economic growth jeopardizes a slowdown in inflation.”
Despite Chairman Powell’s suggestion of an interest rate freeze, the New York stock market fell on this day due to concerns about the Federal Reserve’s prolonged tightening, a sharp rise in government bond yields, and geopolitical conflicts. The Dow Jones Industrial Average closed at 33,414.17, down 250.91 points (0.75%), and the Standard & Poor’s (S&P) 500 Index closed at 4,278, down 0.85%. The Nasdaq index also fell 0.96% to 13,186.
“The Fed is hesitant to say their job is done,” Stephanie Lang, chief investment officer at Homerich Berg, told CNBC. “Until we have a clear idea of where interest rates will peak, market volatility will increase,” he said.
View largerAP NewsMeanwhile, climate change protesters invaded the event that day, causing Chairman Powell to leave and then re-enter. They went on stage shouting “Stop fossil fuel financing” and were stopped.
New York =
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.